If Country a Has an Absolute Advantage Over Country B

question 29

Multiple Choice

If country A has an absolute advantage over country B in the production of good X, then:

• A)the opportunity cost of producing X in country A is lower than in country B.
• B)the opportunity cost of producing X in country A is higher than in country B.
• C)good X can be produced in country A using fewer inputs than in country B.
• D)good X can be produced in country B using fewer inputs than in country B.

---

Definitions:

Ideal Standards

Benchmark levels of performance set under perfect operating conditions, used for budgeting and measuring efficiency.

Materials Price Variance

The difference between the actual cost of materials and the standard or expected cost.

Standard Costs

Predetermined costing used in budgeting and decision-making, representing an expected cost under normal conditions.

Overhead Volume Variance

The difference between the budgeted overhead based on standard hours allowed and the actual overhead incurred, due to differences in activity levels.